Many people believe that joint accounts are a good way to avoid probate and transfer money to loved ones, and such accounts are sometimes referred to as “the common person’s estate plan.” While joint accounts can be useful in certain circumstances, they can have dire consequences if not used properly.
Adding a loved one to your bank account can affect your eligibility for Medi-Cal as well as expose your account to the loved one’s creditors. When a person applies for Medi-Cal Long-term care coverage, the State looks at the applicant’s assets to see if the applicant qualifies for assistance. If your name is on a joint account and you enter a nursing home, the State will assume the assets in the account belong to you unless you can prove that you did not contribute to it.
In addition, if you are a joint owner of a bank account and you or the other owner transfers assets out of the account, this can be considered an improper transfer of assets for Medi-Cal purposes. This means you could be ineligible for Medi-Cal for a period of time, depending on the amount of money in the account. Another problem with joint accounts is that the account is vulnerable to all the account owners’ creditors. For example, suppose you add your daughter to your bank account. If she falls behind on credit card payments and is sued, the credit card company can use the money in the joint account to pay off your daughter’s debt.
Finally, you need to be sure you can trust the joint account holder because he or she will have full access to the account. Either account owner can take money out of the account regardless of who contributed to it.
There are better ways to conduct your estate planning. A power of attorney will ensure family members have access to your finances in the case of your disability. If you are seeking to transfer assets and avoid probate, a payable on death designation or a trust may make much better sense.
Ms. MacDonald’s practice is limited to Estate Planning, Probate, Elder Law and Family Law. Ms. MacDonald maintains her practice in the Santa Clarita Valley at 27013 Langside Avenue, Suite A in Santa Clarita, California. She can be reached at 661-251-1300.